Seems
a bit like an oxymoron, no? Well, that’s exactly what analytics have become
these days: an oxymoron. A real conundrum. On one hand, data helps us predict
change and plan for the future. On the other, that data can be wrong or
misleading and, therefore, really screw things up. So, I say, take it all in,
but then let (most of) it go.
There’s an ongoing debate regarding the roles of data and entrepreneurship. In particular, the increased availability of analytics data and tools is making planning, scheduling, and analysis much simpler and more accurate. Amazon is one of the best examples of using analytics to improve logistics (i.e. more one-day shipping).
In contrast, the argument stands that these tools are less effective than originally expected. The most significant instances are incorrect data, method, and change. If the data is wrong, access to more data does not improve analysis. Mistakes like Boeing, Afghanistan, WE WORK, G.E. and retail stores represent diverse examples where people simply focused on wrong information. The existence and use of the phrase “alternative facts” supports the unnerving idea that it’s easier to make up lies than it is to refute those lies. That alone does not bode well for analytics and data.
Data can also be misleading when a dramatic change occurs.
Disrupters like E-Commerce, ride share apps, and food delivery dramatically
affected markets and parameters. Consequently, significant shifts in culture,
politics, and buying habits also make economic forecasting much less reliable.
Additionally, analysis is dependent on using the right
tools and methods. Many assumptions and approaches may not be appropriate. For
example, investment advisors frequently tout their individual excellence while
changes in the overall market are usually the largest factor in investment
success. Mathematics shows that the more history one has on a topic, the more
accurate the analysis. However, if parameters change, history may become
irrelevant.
This is why we take it all in. Think on it. Absorb it. Let
it all sit for a bit. And then throw most of it out the window.
You should absolutely consider what they teach on the first
day of a statistics course (Validity, Reliability, and Accuracy) rather than
ignore it.
A recap in case you need a refresher:
Validity is simply focusing on whether
your methods are valid. While sampling, correlation, and other tools can improve
performance, the analysis must be valid. For example, many of us predict that
our team will win. However, the odds in most professional leagues are that
about 3% of approximately 30 teams will actually win.
Reliability is the repeatability
of results. Differing results in political polls or verifying results of
medical tests are examples of reliability issues.
Accuracy is just the correctness of
the measurement process. The most violated rule of accuracy is that you are
only as accurate as your least accurate number. There is a famous story about a
museum guard answering a child’s question about how old a dinosaur was. He said
280 million years plus 39 years and 20 days. When asked where the number came
from, he said, ”When I started, they told me it was about 280 million years
old. I have been here 39 years and 20 days.” While this number certainly seems precise, it probably isn’t very accurate.
I would add a fourth factor to this list, which is probably
the most important: Bias. On one hand, bias is a complex mathematical
term correlated with sampling, randomness, analysis, and other things. On the
other, it is how our culture, background, gender, age, and preconceptions etc.
affect our attitudes and decisions. For example, many studies have shown that
we form an opinion about a presentation within 90 seconds of it starting. I
highly recommend that, in dealing with bias, you manage its existence rather
than trying to deny it.
Finally, tools as well as methods of reporting are
dramatically changing. A colleague of mine recently challenged my website saying
it was “too dependent on PowerPoint and Excel.” While these are both great
tools and are the most dominant analytical and presentational methodologies,
they can have many limitations: The information can be old, longitudinal
analytics is frequently lacking, they are not interactive, they are not visual
enough, and they can be very boring and/or misleading. Nothing is worse than being
forced to sit through a PowerPoint presentation that is too long and loaded
with endless Excel sheets.
In summary, analytical tools offer great potential for success, but they need to be utilized properly and in conjunction with intuition to be effective. So, gather all that data and pay close attention to it, but don’t be afraid to toss it all out.
Too many cooks spoil the broth. A child, looked after by
seven nannies, is a child with one eye… Phrase it however you want, but when many
manage one thing, some things are missed or turn out wrong. The camel analogy
specifically criticizes committees and group decision making, implying that
incompetence results when too many people are involved on a project. Therefore,
the camel’s humps reflect bad planning and inept design when the original concept
was a horse.
These proverbs speak to a number of current issues
regarding decision making, innovation, and performance. It’s worth asking: How
disciplined, organized, programmed, and/or fact-based should decisions be? Or are
we heading in the direction of unstructured, flexible, creative, and innovative
planning?
Unfortunately, we tend to rely on preset parameters or
stick to old habits rather than pursuing the most effective process. So, let’s
explore some topics that can help you decide what the best plan of action might
be for any given scenario:
Camel (Committee)
Versus (Horse) Individualism
The simple answer is it depends. If you have a thriving
company with ample market and internal capabilities, diversifying can be an
exciting option. In particular, vertical and horizontal integrations can assist
in achieving better use of your resources. Similarly, if you have operations or
marketing capabilities, cooperation can be highly productive in better
utilizing those resources.
In contrast, the less resources, knowledge, or experience
you have with cooperation, the less you should do it. Diversification does not
work effectively in business cultures that have no synergy. Similarly,
cooperation frequently fails when it is done to solve or cover up weaknesses. The
K-Mart and Sears merger is one of the best examples of failed diversification
which was executed with poor management and a prayer that two losers would make
a winner.
Innovation Versus Discipline
I believe innovation and discipline can coexist. You
simply need to focus on improving autonomy at all levels as you simultaneously
increase discipline. For example, Google, among other big corporations, are
developing artificial intelligence (AI) programs to write and develop artistic
works like music and art. They argue that this technology will greatly enhance
an artist’s ability to create. Others disagree, saying that it will just
replace artists. My own experience in the knitting industry showed me that
automation greatly enhances an artist’s potential and reduces mundane tasks. I
believe that similar improvements are evident in areas like digital photography
and animation.
George Bernard Shaw said, “The reasonable man adapts himself to the
world; the unreasonable one persists in trying to adapt the world to himself.
Therefore, all progress depends on the unreasonable man.” Similarly, Steve Jobs
quipped that if he asked customers what they wanted; it would be obsolete
before he got it on the shelves. So, it remains that innovation is a
necessity, but if it’s unmonitored, you may end up with that pesky camel…
Focus Versus
Diversification
Some businesses
try to randomly pursue diverse options by simply throwing s**t at the wall and
seeing what sticks. Others complete so much research and planning that, in the
process, aspects like goals, probabilities, and outcomes are overshadowed or
forgotten. Business owners need to identify priorities and focus. From there,
test and adopt or change as opportunities or issues arise. It’s important to
remember that many plans are based on wrong assumptions or are poorly executed
and, therefore, do not succeed or are unable to adjust to change.
For example, I
was working with a client who was trying to execute over 15 different
educational programs and was stressed out, over budget, and not managing
effectively. We simply cut out the least effective programs which saved money
and, as a result, were able to allot additional attention and resources to the
more effective ones. Focusing your strategy can be accomplished with a few
simple efforts:
Measure, Estimate, Prioritize, and Adapt.
Follow the 80-20 rule.
Make
mistakes and learn from them.
Be open to change and feedback.
Experience and
Expertise
In his book “Outliers,” Malcolm Gladwell became famous for stating
that, “10,000 hours of practice are required to become a world-class expert.” I
am not sure it is 10,000 hours, but my experience indicates that experience and expertise are probably the
most important factors in achieving success. That doesn’t mean you need expertise
in everything, but it does mean you need at least a hook in the field you are
pursuing. And if you know you are lacking expertise in a critical area, I
suggest hiring someone to help.
For example, right-brain creatives typically don’t like
financial analysis so it’s usually a good idea for them to hire an accountant.
In the last couple of weeks, I have had clients with seemingly great ideas and
passion who overestimated their gross margins by 10-20%. They simply didn’t do
the detailed financial work and didn’t understand that those numbers could make
a huge difference between profit and loss.
This argument is in no way intended to ignore the
importance of passion, commitment, innovation, testing, and even mistake making.
I’m just saying that both individuals and organizations need to realistically
assess the risk of failure and the reward of success. Expertise and experience
are critical for accurately evaluating opportunities and new innovations.
Risk Evaluation
Are all of the features of a decision understood?
Do you know the probability of reward, the amount of the reward, and the value
of the reward? For example, what are the goals of your efforts? My clients are
usually small businesses who need to make a profit and earn a living. Thus,
they frequently pursue less risk.
In contrast, venture capital firms are
frequently pursuing growth and worry whether the enterprise will be large
enough to generate large returns. Therefore, they expect a certain amount of
loss as well as some lost investments in order to generate large growth and
profits in other areas.
Analytics Versus
Intuition
The increased use of analytics over
intuition has been significant in improving the understanding and results of
decision-making. This shift was greatly influenced by the growth and confidence
in behavioral economics fostered by authors like Daniel Hahnemann, Richard
Thaler, and Michael Lewis. While there are no quick and simple resolutions,
there are a few simple rules to improve the decision process using both
analytics and intuition.
Analytics is simply the increased
use of research, models, probability, risk, numbers, and analysis to improve
decision-making. In some cases, it has proved to be a valuable tool to
understand and improve decisions or simply validate prior intuition—particularly
where there is plenty of stability and historical data. For example, I have helped
several of my clients improve their businesses by focus on the 20 percent of customers
or products, which we know, statistically, accounts for 80 percent of their sales.
Here are some simple
guidelines to help manage decision making dilemmas:
Understand goals,
tasks, and complexity. For example, the more uncertainty and unclear
information, the more you need to rely on intuition.
Integrate the proper
role of expertise. If you have complex tasks that require diverse resources,
incorporate collaboration. If you have standout experts with extensive
experience rely on their abilities. For example, I am always fascinated how
surgeons and lawyers delegate tasks to paralegals and surgical nurses.
Test, measure, and
adapt. Gather information, confirm ideas, adapt and improve winning ideas.
Incorporate risk to
evaluate the potential and results of success.
Don’t be afraid to
follow your passion, commitment, and instincts.
Take a break. We are
frequently too consumed and stressed with our tasks. We don’t take time to
incorporate efforts like training, casual lunches, social events, new ideas,
reading, and informal meetings into our routines.
The goal is really to find a balance between group decision making and individual efforts so you don’t wind up with a camel when you wanted a horse. Recognize when analytics, facts, and research can improve your decisions. And don’t be afraid to follow your intuition when traditional answers don’t seem correct. Taking probabilities, risk, and values into consideration, you should be able to find some harmony between the two ends of the spectrum.
“He didn’t even say thank you…” The indignation that we feel when people don’t mind their Ps and Qs is very telling of how our words and actions (or lack thereof) affect those around us. In a work setting, this often manifests as appreciation or respect. When someone simply acknowledges or thanks you for your work, it goes a long way. Employees who feel appreciated tend to perform better and have a stronger sense of fulfillment in their jobs overall. It only makes sense, then, that support and positive feedback are essential in order for a business to grow, increase productivity, and experience positive change.
While providing a coworker with a quick “Great work” is always a morale boost, a shift in mindset and a restructuring of business practices may be necessary before you can truly enact significant change. Establishing a support culture can increase productivity and create an environment where conflict is replaced with respect.
Here are a few key elements to creating Support Culture:
Acknowledge and address
disequilibrium.
The most apparent solution is to simply be aware of any dilemma
that arises and consider the implications. Change generally does not occur
unless there is a need, a conflict, or some sort of imbalance. When one of
these exists, we frequently attempt to squash it quickly to avoid change.
However, when conflict is approached with an open mind, the commitment to entertaining
varying opinions with respect, and a willingness to discuss, we open the door
to possibilities and solutions that we may have otherwise overlooked. In
collaborative settings, this encourages communication and compromise as
participants feel supported knowing that everyone’s best interest is being
considered.
Understand the culture and participants.
What
motivates one person will not inspire everyone. We’re all influenced by innumerable
factors including upbringing, past experiences, and innate qualities. For
example, some people are more left-brain, technical thinkers while others are
right-brain, creative types. These people will have different approaches to
doing the same task and that’s okay. Respect that everyone learns differently
and thrives in varying environments. Honor each individual’s strengths and your
team will be stronger for it.
Organizations
need that variety, as productivity is a result of support and encouragement
combined with the appropriate tools and direction. A great example is how sports
coaches often use a mixture of motivational techniques accompanied by hard work
to get players to reach their full potential.
This
approach only works, however, if you know your audience. Once, during a
planning meeting, in which several finance employees were arguing about how to
improve EBITA, the creative head (who was incredibly talented and somewhat
eccentric) asked, “What’s an EBITA? It sounds like an animal.” The takeaway
here is that we must consider our listeners and respect their background and
point of view. When we try to solve problems without taking everyone’s
perspective into account, we risk misunderstandings. We often get so caught up
thinking our own ideas and opinions are the best that we ignore how the
perceptions of others’ will alter our effectiveness. When you know where
someone is coming from, you better understand how to most appropriately and
effectively support them.
Avoid confirmation bias.
Age, status, education, and reputation of the listener and
communicator can all dramatically affect our perceptions. When we make
assumptions about someone based on these sorts of qualifiers, we either
consciously or subconsciously become biased. And it’s nearly impossible to
genuinely support
someone you’re bias toward.
Whether it’s a positive or negative inference, we jump to
conclusions without all of the facts. If you rely on a GPS system that suggests the fastest route, but does
not include traffic, accidents, or construction related detours in its
directions, your bias is misinformed. Frequently, we underestimate the
importance of analytical information or fail to consider things like experience
when communicating alternatives among different groups. It’s important to know
what your biases are and accept that, while we all have them, it is also our
responsibility to challenge the way we’ve been conditioned to think.
Focus on a “WIN-WIN” approach when communicating.
We all know
positive feedback is received more favorably and, yet, how often do we revert
to criticism, blame, or a “one-upping” mindset when we find ourselves in
pressure situations. Support and encouragement are essential to innovation. It’s
important to create and maintain a positive atmosphere where people feel safe
sharing ideas.
Avoid
negative talk and never enter a discussion with the goal of “winning.” It’s not
about winning or losing; the purpose of communication is to share ideas and come
to an agreement on the best solution—whether that’s through compromise or one
party acknowledging that, this time around, perhaps their way isn’t the best
approach.
I like to
refer to Sheryl Sandberg’s advice about establishing an encouraging environment
where people feel confident enough to consider the question, “What would
you do if you weren’t afraid?” When we feel supported, we’re able to let go of
inhibitions. That’s when we’re free enough to experiment and throw out “crazy”
ideas without the fear of failing or being ridiculed. Because those “crazy”
ideas are usually where innovation is born. Similarly, we should look at
mistakes, and even failure, as learning experiences rather than defeats.
Frequently, those frustrations also lead to inspiration.
Be inclusive.
Inclusion
always yields a sense of camaraderie and support. When it comes to
administration, I highly recommend Tom Peters’ “Management by Walking Around.” It
advocates for a more relaxed atmosphere where there is less of a separation
between “bosses” and “subordinates.” It suggests that employees are more
productive in environments that encourage cooperation over intimidation.
Examples of this include informal meetings, going to a coworker’s office
instead of demanding they come to yours, open office space with collaborative
workspaces, and more face-to-face time.
Communicate openly.
Organizations
and individuals who communicate openly are more successful. Keeping everyone
informed inspires a sense of belonging and results in increased productivity.
The old mentality of maintaining exclusivity amongst execs is inefficient and only
fuels a sense of separation. The more people know, the more effective they can
be.
Respectfully manage individuality.
There are always going to be eccentrics who need to be managed differently. Similarly there will be people who need more direction. Learn to appreciate and utilize everyone’s varying skillsets. This may mean giving more freedom to creatives who produce their best work at odd hours or being stricter with employees who thrive under pressure and deadlines. You will also need to address issues of under performance. However, the main point to remember here is to approach all situations with a sense of empathy and respect. When you approach people with a desire and intent to help, they’re much more inclined to be receptive to feedback and help your business increase productivity.
Mind Your Ps and Qs.
This is the most obvious and yet, too frequently, forgotten. The
easiest way to show support and appreciation is through simple words of
acknowledgement like “please,” “thank you,” and “nice job.” Remembering and
using people’s names or referencing a detail you discussed in a previous
conversation goes a long way. Letting people know they are seen and being heard
is one of the highest forms of respect. We all know how good it feels to be on
the receiving end of that.
Establishing a strong sense of respect between customers, suppliers, and coworkers is a critical
component of success. And while it takes constant effort, it is relatively
inexpensive. A great starting point is to simply check in with yourself and ask
if you’re making a consistent effort to see things from others’ point of view
and understand where they are coming from. How much more efficient and
compassionate would we be if we applied this mentality to all aspects of our
lives?
Dr. Bert Shlensky, President of The Startup Connection, offers guidance to help small business achieve maximum sales and profit. He utilizes his 40 years of high-quality experience to launch your business to the next level via technological, social, and online integration. Call or email to setup a free consultation:
Ah, the good
old 80-20 Rule… The saying “Rules were meant to be broken,” certainly applies
here. It’s one of those things that can seem like a positive or a negative
depending how you look at it. Similar to the, “Is the glass half empty or half
full?” question, your view of The 80-20 Rule is all about perspective and
making sure yours is aligned with the goals of your business.
Perhaps it’s
frustrating that 80 percent of your efforts account for only 20 percent of your
bottom line. But, it’s also pretty cool that just 20 percent of your customers
and products produce 80 percent of your profits.
It’s all about balance. And, as you find that equilibrium, you need to know when to reconsider The 80-20 Rule:
1.When More Selection is Required
There are times when one size does not fit all. You may provide the best
gosh darn spicy mustard the world has ever tasted, but sometimes a spicy
mustard isn’t the right mustard choice. There are circumstances when a classic
yellow mustard is preferable. Or maybe there’s a recipe that calls for a Dijon
mustard…
The point being: There are complexities that require consideration and adjustment on your end. That might manifest in a variance in investment strategies, production process, or product offering. Small tweaks to your 20 percent can result in a major boost in profit.
2.When The Present Does Not Reflect The Future
While a company’s best product and most loyal customers will consistently
account for a higher percentage of sales and profits, there are instances when
those factors are not reliable in the long run. Sales may drop as necessity
decreases and/or newer products/services become available. Competition is
always a factor and, during a time when technology constantly and rapidly
changes, your current best seller may not always be in high demand.
If you only focus on what’s doing well now, you’re bound to experience adversity in the future. If you rely to heavily on one thing, you inhibit potential growth. There is a simple need to develop and test new products to advance and survive.
3.When Expansion Creates Opportunity
Opportunities to expand your market will arise and the investment may not
be a part of your current 80 percent. These instances are worth serious
consideration—especially when the investment is minor. You may open up the door
to a broader 20 percent. For example, babies’ diapers are still the major
market segment, but adult diapers are the fastest growing segment. Expanding
your offering (this may include accessories, convenience items, or new market
segments) can draw in a wider customer base and that is never a bad thing.
One last
thing to consider: Diversity Requires Variation
Many markets
rely on analysis, which is based around the assumption of a bell curve where
the bulk of a population is around a center number and then distributed evenly
around that number. For example, the average U.S. adult male is about 5 foot 9
inches and 75% are between 5 feet 4 inches and 6 feet. However, if you start
segmenting by age, race, ethnicity, and country of origin the distribution
becomes much more complex. The average Danish man is almost 6 feet tall while
the average male from India is 5 feet 5 inches. In both cases using an average
of 5 foot 9 inches would miss much of the population.
Therefore,
it is beneficial to dissect your target consumer and consider multiple
offerings based on the possible variations that exist within that group.
In the end, The 80-20 Rule is still a reliable
tool in most cases, especially when trying to eliminate excess product or hone
in on top buyers. However, as always, exceptions to rules always seem to be
where the fun happens—the chance to maximize growth as you reassess opportunities,
trends, and market segmentation.
We’d love to hear about your
experience improving business performance by adding or reducing offerings.
Have questions? Call (at 914-632-6977) or email us for a FREE analysis and discussion regarding your offerings. We’d love to help you design a personalized solution.
A customized approach that caters to each of his clients’ specific needs is what sets Dr. Bert Shlensky apart. With a PhD from the Sloan School of Management at M.I.T., he focuses on implementing individualized strategies that have helped countless businesses increase sales and profit. He knows what works and has the experience and expertise to help you take the steps necessary to achieve your business goals. Visit StartupConnection.net today!
Business culture: know about it, and just as important, don’t underestimate its importance
I read an interesting article in Harvard Business Review (Pisano; June 2015) about the need for better strategies in executing innovation in organizations. While the article has some great recommendations, it ignores one critical element of innovation: the importance of a business culture that nurtures the creative environment.
Here’s one way I could explain “business culture.” And, forgive me; I do like to use the “shipping” metaphor. So, let’s pretend that Ship A and Ship B have been given the assignment to go find a new route to some new place that will bring in lots of money. Ship A is run by a captain that seeks perfection, that likes to follow the path that other ships have taken before, and will not think about the point when his crew has reached the “fork in the sea,” and has to tell the guy who steers the ship which way to turn. Throughout this voyage, he has taken the safe route, has not considered the idea that taking a new route entirely may be the best way to go. He may either doubt his ability to lead in some way, or does not have the ability to think outside the box. I’m not feeling too good about Ship A’s chances. (more…)
When you want to stand out, reach out to Bert for the tools that will build your “sticky” brand. My focus is on understanding and analyzing your dilemmas and challenges, so your company becomes profitable faster.
Call (914) 632-6977 or email me at bshlensky@startupconnection.net. Don’t leave without signing up for our useful free eBook!
Feeling stumped or overwhelmed? Contact Bert at (914) 632-6977 or Email to start the process. Thanks!
